While China has a trade surplus, you might also say it has a demand deficit. Historically, that void was filled by foreign demand. In 2009, it was filled with government induced investment. One thing that does not get much air time is China’s lack of a consumer oriented supply chain system.

The engine of labor growth in China in the last decade was export oriented SMEs. These privately owned firms were, by and large, contract manufacturers. If China were now to aim this productive capacity inward, it will have to substantially retool the system.

Think what it takes to develop, produce, market, and deliver a consumer product. I would submit that China is not good at this…yet. Name a Chinese consumer brand that has world recognition? Lenovo? That’s legacy IBM. Haier? maybe but if that’s the best name,then there is a lot of work to do.

My point is not to say China cannot turn its consumer manufacturing strength into an integrated domestic “closed end system”, it is more that this change will take time.

Such a system requires good signaling, accurate and timely information about market demands. Close coordination between manufacturer, wholesaler, distributer, logistics company and retailer. Timely and accurate information is not one of China’s strong suits.

In sum, it is pretty easy to manufacture a widget to the specification supplied under a contract and get that product to port. It’s another thing to understand the consumer’s need, develop product concepts, price it appropriately, advertise it, manufacture it, distribute it and retail it. That’s a much more sophisticated system.

China can do it. But it will take time and it will take support from the Party, consistent and transparent commercial regulations that promote such a supply chain, a system of open information exchange, price signaling, and, lastly, a much better system of allocating investment capital (banking and capital markets).

Stripping off all foreign debt (which can be a problem for US, but not yet)
The real US public debt problem is US structure problem.

any thoughts guys?

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Capital Allocation is critically important for any nation in the world. The people who decides where to invest the surplus-labour stored in its capital, also decides the future of the economy.

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I probably have not read enough into the troubles Japan had after the Plaza Accord and the 90s asset bubble. But at the very fundamental level, I believe the fail of Japan vs the success of US (3rd Industry Revolution)in the last decade of 20th Century, is the result of grand-scale capital mis-allocation.
All asset bubbles in the world is a form of capital mis-allocation, i.e. while the public lacked alternatives investments (same situation in HK in 1990s) and decided to invest its money(store for surplus-labour) in hard asset (like property etc). The value potentially to be created from the surplus-labour stalled. People start to gamble on hard asset and consume its surplus-labour stored in money. As a result, the nation’s overall value deteriorate, marginal return (in value) diminishes.

The current debt-cage monetary system in the world (per ‘Money as Debt’), causes structure problems for every nation of the world.

Alternative scenario:
if Japan have successfully completed its research in robotic science(or something else), and capitalised/industrialised its achievement, Probably Japan would have led the world into the 4th industry revolution.

thoughts?

http://english.caing.com/2010-03-09/100124222.html

which seems to suggest that they may indeed be planning to help HUIJIN maintain their control ratios whilst the banks recapitalize, using the FOREX reserves. I am having trouble picturing how this all could work out for the various players, namely PBOC, SAFE and CIC/HUIJIN as well as the banks’ capital classifictions…

Any guidance would be much appreciated, although i realise that this article doesn’t give us enough information about the “how”.

I’m looking forward to your reply.